To mark the 80th Anniversary of the Great Crash of '29, we asked 15 progressive thinkers to write about lessons learned and what lies ahead. Together, their reflections constitute a New Agenda for America -- a message of how the ideals of a fair society should apply to the economic and social policies of our time.
Today marks the 80th anniversary of an epochal day in this country's history -- the beginning of what became the Great Depression. The widespread misery that followed changed our ways of conceiving of the economy and how a good society should operate. While there have been other dark days on U.S financial markets, these have not resulted in an overhaul of the way the economy runs. But September 15th, 2008 -- the day that Lehman folded -- may turn out to mark the movement toward an alternative paradigm.
There are several important differences between the economies of the 1920s and 1930s and today's economy. In 1930, the government share of GDP was a sixth of what it is now and the manufacturing sector accounted for a larger proportion of the national output. Because of this, government intervention could have immediate and drastic impacts both on the ground and psychologically (witness Roosevelt's fireside chats). In those days, the United States was positioned to be the ascendant superpower, running a trade surplus in most months of the troubled 1930s. The U.K was the power in decline, an empire which ran continual trade deficits.
It is too early to say whether the current crisis will have the same impact on our ways that the '29 Crash did. But clearly, several lessons of that traumatic period will need to be relearned. We must once again understand that financial markets need regulation, accept the necessity of government intervention, and move beyond the outmoded thinking that exacerbated a global downturn. Hopefully, our political leaders can learn from history and move beyond market fundamentalism to meet the challenge now and in the future.
Rob Johnson is a Senior Fellow and the Director of the Project on Global Finance at the Roosevelt Institute.